Background/Summary
The case study highlights the challenges that IKEA faced in its global outsourcing endeavors. The case outlines how Mariane Barner faced tough outsourcing decisions to cut off one of the major suppliers of Indian rugs. Although the decisions had the potential of disrupting the after-sales and the overall supply, she understood that the supplier had faced credibility challenges. The case outlines IKEA’s distribution system as an entity that relies exclusively on global outsourcing. The company realized the rugs carpet line is a profitable venture that exposing it to suppliers with a reputation would hinder its operations’ effectiveness.
Issues/Desired Outcome
Barner faces the challenges of balancing between the concerns of social responsibility and the economic business of the rugs product line. The underlying issue is that IKEA should decide to handle the Indian rug suppliers without compromising its business objectives. The supplier faces the credibility issues of incorporating child labor in the process of production. However, the Indian rug carpet does not constitute a considerable portion of the sales for IKEA. Removing the supplier from the business would not hinder IKEA from achieving its business objectives (Bartlett, Dessain, and Sjöman 1-2). As a global outpouring firm, the position of IKEA implies that the production demands should fulfill social responsibility. Therefore, the critical problem in IKEA’s situation is to utilize the hands-off manufacturing approach in sourcing for the Indian rugs and other products. The company does not have a proactive approach and still employs a cost labor strategy. Therefore, IKEA must be socially responsible in its business process. However, the decision to cut off the supplier could lead to a reduced profit margin. For this reason, IKEA needs both long-term and short-term reviews in addressing its global outsourcing challenge.
Recommendations
Decisive. IKEA needs to develop different solutions that would reinforce Barner’s decision to eliminate the supplier for the Indian rugs. The decisive recommendation is that IKEA cancels all the contracts with the supplier in the wake of their violation of child labor.
Supported. IKEA could allow the supplier of the Indian rugs time to correct their actions to fulfill address issues of child labor violations. The condition for this decision is to enable IKEA to review the future contract with the suppliers. As a result, IKEA would meet the current supply obligations and outsource products in the stores. The supportive approach supports the culture of IKEA in collaborating with suppliers for efficient outsourcing.
Actionable. IKEA could suspend the contracts with the supplier temporarily until the suppliers complete the current contract. The proactive program approach would help IKEA allow appropriate time for all the stakeholders to make necessary adjustments in the wake of the decision.
Reasonable. IKEA should screen all the suppliers and subcontractors in the production line. The action ensures that all the stakeholders abide by the existing standards of operations and the contract terms.
Outcome. IKEA needs to carry out the audit. The decision will increase efficiency in the business process and eliminate emerging challenges in outsourcing. Besides, it will also allow for collaboration among consumers and contractors in improving outsourcing. Barner has the responsibility of enhancing IKEAs marketing outcome. The customers and suppliers of the companies require Barner to make short-term and long-term solutions to address the problem of canceling the supplier. The company needs to take swift actions to enhance the company’s operations and consider ethical business processes.
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